Exploring uncertainty and emotion in the knowledge‐based theory of the firm

Abstract

Uncertainty, managers’ frequent companion as they guide firms towards anticipated goals, is poorly dealt with in theories of the firm. If knowledge is to be treated as the most strategic of assets, we must consider its relation to uncertainty. Knowledge suggests a degree of certainty, an absence of uncertainty. The paper draws on prior research and categorize uncertainty as three types of knowledge deficiency: indeterminacy, ignorance and incommensurability. It is argued that uncertainties lead to emotion. The paper draws on analysis of emotions as value judgments, indicating a person attaches significance to things lying outside her/his control that affect her/his goals. This insight opens a way of relating knowledge and uncertainty. The impetus behind this approach is partly theoretical and partly personal, from observing and participating in New Yorkers’ emotions during and after the September 2001 WTC attacks. It is argued that it is no longer acceptable to ignore the ways in which emotion shapes our knowledge. The paper moves from rational self‐interest, the calculative basis for organization, to the social and cultural basis of identity through action, pursuing the idea that knowledge deficiencies produce emotional responses as they arrest rational decision making.

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